Luxury’s2021 E-Commerce

Transformation

Contents

02 LUXURY’S DIGITAL MAKEOVER

03 RESILIENT BRANDS ACT FAST DURING ECONOMIC SLOWDOWNS

04 CASE STUDY: MOVADO FINDS GROWTH IN MULTIPLE MARKETS

06 THE GLOBAL GROWTH OPPORTUNITY

07 2021 LUXURY INDUSTRY TRENDS

08 2021 CONSUMER TRENDS

10 THE FASTEST GROWING LUXURY SEGMENT: DIGITALLY-SAVVY GEN Z

11 UNLOCK CROSS-BORDER DEMAND FOR YOUR BRAND

Luxury’s Digital Makeover

E-commerce has become an essential channel for luxury brands, who have historically been slow to move online, as COVID has shuttered stores and kept shoppers at home. For many shoppers, the move online will be a permanent one.

30% OF LUXURY SHOPPING WILL BE DONE ONLINE BY 2025 VS. 22% IN 2020.1

In 2021, luxury brands will look to quickly reconnect with customers across geographies by bringing their VIP customer experience to the online world. Continued economic uncertainty means a response to recent industry changes is imperative. Not doing so would risk further loss of customers and revenue.

Brands who already had an e-commerce channel, or who set one up quickly in 2020, were better equipped to mitigate the effects of COVID on their business. So too were those with a geographically diverse offering.

Many brands that embraced cross-border e-commerce saw impressive results as demand popped up in unexpected markets. Taking advantage of this momentum of change is imperative for brands to recover. The challenge will be to

swiftly expand their digital offering while maintaining the high-quality service level that is fundamental to the luxury market.

Brands need a solution that will enable rapid entrance to new markets, offering a domestic-equivalent experience that is personalized and friction-free. Navigating the complexities of doing so can be daunting, but these brands will be in a better position to recover from 2020 and weather future economic uncertainty.

02 1 Bain & Company

IF YOU DON’T HAVE YOUR SUPPLY CHAIN, E-COMMERCE, ETC. UP AND RUNNING IN ALL

MARKETS, THEN YOU’RE A WEAKENED PLAYER.”

– Elsa Berry,Founder of luxury M&A Advisory firm,

Vendôme Global Partners

Resilient Brands Act Fast During Economic Slowdowns

03 2 McKinsey, 3 McKinsey

TOTAL SHAREHOLDER RETURN (TSR) PERFORMANCE FOR COMPANIES IN THE TEXTILES, APPAREL, AND LUXURY GOODS INDUSTRY1

IN 2021, WE WILL SEE BUSINESSES WORKING HARD TO RECOVER FROM THE ECONOMIC BLOW CAUSED BY THE PANDEMIC.

With extended lockdowns, store closures, travel restrictions, and the reopening of stores still unpredictable, brands and retailers must embrace changing consumer behaviors and make quick, bold decisions. Investing in top-line growth as early as possible accelerated the rebound of resilient brands after the 2008 financial crisis and led to revenue increases of up to 30% compared with those of non-resilient brands.2

Even as the vaccine is rolled out around the world, the future of in-store shopping is uncertain. Today, more than 80% of leaders at consumer and retail companies report that they are making and implementing major decisions faster than before.3 Best in class retailers know that to recover from 2020 and be in a strong position for the future, they need to think creatively about identifying revenue opportunities.

1 Calculated as market capitalization weighted TSR index of Resilient and Non-Resilient companies in the Textiles, Apparel and Luxury Goods industry, includes 862 global Textiles, Apparel and Luxury Goods companies that were trading between 2007-20172 Resilient companies defined as having excess TSR CAGR (vs S&P 500 index) between 2007-2017; companies in the remaining 4 quintiles are classified as non-resilient companies

0

50

100

150

200

300

250

48 6367 96 89153 153 166

296

Start of Downturn(2008)

During Downturn(2009-2011)

After Downturn(2012-2017)

RESILIENT COMPANIES2

NON- RESILIENT COMPANIES

S&P 500

CASE STUDY:

Movado Finds Growth in Multiple Markets

04 4 Digital Commerce 360

For Movado Group Inc. (MGI), investing in e-commerce was a number one priority. They were already seeing growth in the channel and were eager to capitalize on the web traffic they were getting from international markets where they didn’t yet have a presence.

MGI partnered with eShopWorld (ESW) in 2020, enabling them to quickly offer localized website experiences in each of their target markets and ensure customers in those markets were getting a shopping experience that aligned with the brand’s innovative reputation.

ONE OF THE BIGGEST BENEFITS OF ESHOPWORLD IS THAT IT HANDLES CHECKOUT, CURRENCY, CUSTOMER AND DUTIES FOR SALES INTO HUNDREDS OF COUNTRIES.”– Behzad Soltani,Executive VP, Commercial President and Chief Technology Officer4

05

After launching with ESW, MGI quickly saw the benefits. They were able to leverage ESW’s presence in numerous markets to expand their reach into countries where they had been seeing demand. Particularly surprising was the growth in countries where they had already been operating a local website, such as Canada.

WE CLEARLY WERE NOT EXPECTING THE COUNTRY WHERE WE ACTUALLY HAD A DEDICATED WEBSITE BEFORE TO HAVE BETTER SALES.”– Behzad Soltani

MGI plans to bring its Ebel, Concord, and Olivia Burton brands on board with ESW and expand into additional markets in 2021.

MOVADO’S ONLINE SALES GREW BY 130% YOY IN

2020, MAKING IT ONE OF THE FASTEST GROWING

JEWELRY RETAILERS.

Movado Finds Growth in Multiple Markets

The Global Growth Opportunity

CROSS-BORDER GROWTH HAS ACCELERATED BEYOND ALL EXPECTATIONS.

In 2018, cross-border e-commerce was a $175 billion market and was on track to grow to US$423 billion by 2023. Cross-border shopping is now projected to make up 17% of e-commerce in 2023, with sales of US$736 billion globally.5

IN 2019, ONLINE SALES MADE UP 10-15% OF LUXURY SALES GLOBALLY. EUROPE AND CHINA WERE AT THE LOWEREND, WITH THE US AT THE HIGHER END. EVEN BEFORETHE PANDEMIC, THIS FIGURE HAD RISEN BY 50% ACROSSALL REGIONS.

The need for luxury houses to invest in cross-border e-commerce is undeniable.

5 Forrester, 6 McKinsey, 7 ESW Data, 8 ESW Data06

SAME-STORE YEAR-OVER-YEAR GROWTH

Brands and retailers partnering with ESW saw explosive growth in 2020 in multiple and often surprising markets, with same-store order volumes up 82% in 2020 vs. 2019.7

While the total luxury market decreased by an average of 30% in 2020, luxury brands providing cross-border shopping through ESW saw an average of 58% e-commerce growth in Q4.8

DECEMBER 2020

NOVEMBER 2020

OCTOBER 2020

0% 50% 100%

65%

49%

60%

9 McKinsey, 10 BCG, 11 Washington Post

2021 Luxury Industry Trends

TRAVEL SLOWDOWNS The luxury sector’s reliance on retail tourism has emphasized the need for digital channels as travel restrictions persist. Sixty-six percent of fashion executives don’t expect travel retail sales to recover their former growth levels for 2-3 years.9

46% OF LUXURY SHOPPERS APPRECIATE MORE PERSONALIZED DIGITAL CLIENTELING, ESPECIALLY CHINESE (76%) AND ITALIAN SHOPPERS (57%).10

Another growing trend is the popularity of virtual try-on technologies. Brands are seeing virtual try-on tools like Zeekit increase conversion rates by as much as 5x and reduce return rates.11 These will be particularly important for Gen Zers who are digitally savvy and a critical demographic for luxury.

PERSONALIZATION GOES OMNICHANNEL To satisfy top spenders, the luxury industry has long been the leading retail sector for innovations in personalization. Even as they move online, luxury customers expect experiences like virtual personal shopping and video shopping assistance to keep the human element in the transaction.

Brands will need to think creatively in their approach to converting new customers and unlocking revenue opportunities. As well as engaging with local customers, brands may look to new markets where recovery is accelerating at a greater pace. To have a strong position in the future, providing a domestic-equivalent experience in all cross-border markets should be a priority.

07

2021 Consumer Trends

12 ESW Data, 13 ESW Data, 14 eMarketer08

CLICK & COLLECT TRANSACTIONS WILL REPRESENT 8.2% OF E-COMMERCE SALES, UP FROM 6.1% IN 2019, AND WILL ACCOUNT FOR 20.4% OF TOTAL US E-COMMERCE GROWTH IN 2020.14

The retail industry is responding by shifting towards more holistic strategies that acknowledge consumer interactions across entire retail ecosystems, blending offline and online channels into an omnichannel strategy in which all consumer touchpoints hold equal weight.

OMNICHANNEL Without ready access to in-store shopping, and with the heightened need for contactless transactions, many consumer behavior trends that accelerated as a result of COVID are here to stay.

CROSS-BORDER SHOPPING After a year of social distancing, consumers in all demographics have become more confident purchasing online, in many cases regardless of geography. In a December 2020 global survey, 68% of all consumers had shopped cross-border in the past six months. More than half of those (52%) said they had made more than six or more purchases from a website outside their own country.12

Luxury houses can capitalize on this growth by building localized e-commerce experiences in key markets.

44% OF CROSS-BORDER CUSTOMERS MADE A LUXURY PURCHASE IN THE LAST SIX MONTHS. SINGAPORE (18%), TURKEY (18%), AND MEXICO (17%) LEAD FOR CROSS-BORDER LUXURY PRODUCT PURCHASES.13

THE CHALLENGE IS TO ENSURE THAT CONSUMERS ARE GETTING THE SAME LEVEL OF LUXURY SERVICE THEY HAVE COME TO EXPECT FROM BRICK-AND-MORTARS.

SPOTLIGHT: SOCIAL COMMERCETHE RISE AND GROWTH OF SOCIAL COMMERCE ALSO HIGHLIGHTS THE IMPORTANCE OF BRANDS HAVING A HOLISTIC STRATEGY IN PLACE. NEARLY 30% OF US SHOPPERS HAVE MADE AT LEAST ONE PURCHASE VIA SOCIAL CHANNELS; THAT NUMBER IS EXPECTED TO INCREASE TO NEARLY 40% BY 2024.17

THE CONSCIOUS CONSUMERThe rise of the socially conscious shopper also continued in 2020. Issues such as employee working conditions and a brand’s environmental impact became factors in the buying decision for many consumers.

15 CommerceHub, 16 GlobalWebIndex, 17 eMarketer, 18 McKinsey

59% of US online shoppers think it’s important for a retailer to offer the ability to buy online and pick up in-store.15

Following the pandemic, 27% of consumers expect to spend more time browsing/researching online before visiting stores.16

59% 27%

66% of consumers said they would stop or significantly reduce shopping at a brand if they found it was not treating its employees or suppliers’ employees fairly.18

More than 3 in 5 consumers said sustainability was a factor in purchase decisions in a May 2020 McKinsey survey.

>3/566%

09

THE FASTEST GROWING LUXURY SEGMENT:

Digitally-Savvy Gen Z

LIFE IN DIGITALGen Zers grew up as digital natives. They are the first generation to experience a lifestyle that is about social currency, social scores, and social recognition.

EXPERIENCE AS DIFFERENTIATORAuthentic, branded experiences are more important than anything else. Gen Z expects quality, but they’re also fickle and expect that something better will be along soon, especially where technology is concerned. Experiences will be a competitive advantage for luxury brands.

19 Forbes

GEN Z CURRENTLY ACCOUNTS FOR 30% OF LUXURY SPENDING, AND BY 2030, THEY WILL DETHRONE MILLENNIALS AS THE MOST IMPORTANT LUXURY CONSUMERS.19 IN A RECENT SURVEY, ESW FOUND

63%

63% of respondents aged 18-34 purchased luxury goods in the past six months.

27%

Nearly 1/3 of those made their luxury purchase from a country outside their own.

Gen Z and millennials are diverse groups, and they expect brands they support to embrace cross-cultural designs that represent authentic diversity.

Gen Z will gravitate toward brands that are aesthetically appealing, well-priced, ethical, and aligned with their values.

Gen Z will require brands to reprioritize digital and innovation, from better e-commerce experiences to showrooming and social commerce.

Gen Z are accustomed to immediate gratification, meaning they are impatient in the way they consume. Rather than waiting for their preferred brands to offer a premium online experience, they will simply look elsewhere.

10

Unlock Cross- Border Demand for Your Brand: A To-Do List

Identify your most profitable markets and find a way to scale them. Can you optimize current markets, or are there regions where you are receiving web traffic but currently not set up for e-commerce?

Look at your shopper experience in existing markets and identify ways to optimize it. Can you add more local payment options? Better local shipping carriers? A more transparent shopping experience that doesn’t surprise shoppers with duties or other fees at checkout?

Build internal teams as well as partnerships with multiple vendors to handle cross-border complexities, including local demand generation, omnichannel, compliance, payment, returns, and customer service, while maintaining a consistent brand experience across markets.

11

WANT TO TALK ABOUT GLOBAL EXPANSION FOR YOUR BRAND? CONTACT AN EXPERT AT GROWMYBRAND@ESHOPWORLD.COM OR VISIT ESW.COM.

12

ESW COMBINES INNOVATIVE TECHNOLOGY, DEEP EXPERTISE, LOCAL KNOWLEDGE AND GLOBAL INFRASTRUCTURE TO CREATE FRICTIONLESS SHOPPING EXPERIENCES IN OVER 200 MARKETS:

ACTIVATE MULTIPLE MARKETS QUICKLY AND COST-EFFECTIVELY

• Integration with your current e-commerce platform

• Demand generation via Google and social media

• Minimal setup costs

• No new staffing needed

• Go live within 12 weeks

CREATE A DOMESTIC-EQUIVALENT SHOPPER EXPERIENCE THAT REFLECTS YOUR BRAND

Fully branded experience •

Local currencies •

Duties & taxes included •

High-converting payment methods •

Customer service •

RECEIVE FULL OPERATIONS & LOGISTICS SUPPORT

Trade compliance •

Customs declaration •

In-country delivery •

Inventory & shipping optimization •

Returns via 51 local hubs •

UNLOCK GLOBAL OMNICHANNEL CAPABILITIES

• Buy online; pick up in-store

• Ship from store

• Return to store

LEVERAGE OUR EXPERTISE & SUPPORT

• Consultation on market opportunities

• Access to ESW subject matter experts and market research

• Dedicated Client Success Manager

• Monthly account reports

HOW ESW TAKES LUXURY BRANDS CROSS-BORDER

Partnering With a Solution Provider is the Fastest, Most Cost-effective Way to Achieve Your Goals of Cross-Border Expansion